This time everything different? Why this bubble is not bursting anytime soon...
- Since Bitcoin's first commercial "pizza transaction" in 2010, the price has skyrocketed by over 500,000,000%.
- So, it's natural for many people to believe that Bitcoin is a massive bubble.
- People may actually be paying for their pizzas with Bitcoin once again, but this time using extremely small portions of their Bitcoins.
- Lots of people have heard of Bitcoin, lots of people have an opinion on Bitcoin, but surprisingly, not that many people own Bitcoin.
- I've never witnessed a bubble that had a relatively low participation rate, was largely decoupled from Wall Street, and had so many people convinced that it was a bubble.
- This idea was discussed in more depth with members of my private investing community, Albright Investment Group .
Bitcoin Vs. Fiat Currencies
There is one thing that has been universally true about all fiat currencies, and that’s that they all eventually return to their intrinsic value, which is zero. In recent history, we’ve seen this occur in Germany, Zimbabwe, several post-Soviet republics, we are currently seeing this occur in Venezuela, and even the mighty USD has lost about 95% of its value since the Fed took over the U.S.’s monetary system in 1913.
If you have a currency backed by nothing, with an unlimited supply, the dynamic is bound to be abused. Sooner or later, the participants, or victims, catch on to this scheme, that the money supply is perpetually increasing, which leads to diminishing purchasing power of the currency and ultimately culminates in a loss of confidence and a devaluation of the paper money.
Bitcoin does not share this problem, as the digital currency is decentralized and has a finite amount that can ever be mined. Moreover, BTC exhibits all the major characteristics indicative of a desirable currency. Bitcoin is durable, easily divisible, highly transportable, extremely scarce, widely recognizable, is impossible to counterfeit, and when it reaches its long-term value potential, BTC will become stable as well as consistent.